California Jury Instruction CACI 1901 Concealment – Fraud

New September 2003; Revised October 2004, December 2012, June 2014, June 2015

Nakase Wade | California Business Lawyers & Corporate Lawyers

Give this instruction if it is alleged that the defendant concealed certain information to the detriment of the plaintiff. (See Civ. Code, § 1710(3).) Element 2 may be deleted if the third option for element 1 is selected.

Regarding element 1, before there can be liability for concealment, there must usually be a duty to disclose arising from a fiduciary or confidential relationship between the parties. However, in transactions that do not involve fiduciary or confidential relations, a duty to disclose material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts that materially qualify the facts disclosed, or that render his disclosure likely to mislead (option 2); (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff (option 3); (3) the defendant actively conceals discovery from the plaintiff (option 4). (See Warner Constr. Corp. v. L.A. (1970) 2 Cal.3d 285, 294 [85 Cal. Rptr. 444, 466 P.2d 996].) For the second, third, and fourth options, if the defendant asserts that there was no relationship based on a transaction giving rise to a duty to disclose, the jury should also be instructed to determine whether the requisite relationship existed. (See Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1187 [175 Cal.Rptr.3d 820].)

If element 4 is contested, give CACI No. 1907, Reliance, and CACI No. 1908, Reasonable Reliance. To avoid any possible confusion created by using “rely on the concealment” (see Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1093 [23 Cal.Rptr.2d 101, 858 P.2d 568].), CACI Nos. 1907 and 1908 may be modified to replace the words “rely,” “relied,” and “reliance” with language based on “behave differently” from element 4. It must have been reasonable for the plaintiff to have behaved differently had the omitted information been disclosed. (See Hoffman, supra, 228 Cal.App.4th at p. 1194 [concealment case].)

•Concealment. Civil Code section 1710(3).

•“[T]he elements of an action for fraud and deceit based on a concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 [129 Cal.Rptr.3d 874].)

•“A duty to speak may arise in four ways: it may be directly imposed by statute or other prescriptive law; it may be voluntarily assumed by contractual undertaking; it may arise as an incident of a relationship between the defendant and the plaintiff; and it may arise as a result of other conduct by the defendant that makes it wrongful for him to remain silent.” (SCC Acquisitions, Inc. v. Central Pacific Bank (2012) 207 Cal.App.4th 859, 860 [143 Cal.Rptr.3d 711].)

•“In transactions which do not involve fiduciary or confidential relations, a cause of action for non-disclosure of material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.” (Warner Construction Corp., supra, 2 Cal.3d at p. 294, footnotes omitted.)

•“[O]ther than the first instance, in which there must be a fiduciary relationship between the parties, ‘the other three circumstances in which nondisclosure may be actionable: presuppose[] the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise. … “[W]here material facts are known to one party and not to the other, failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose such known facts.” [Citation.]’ A relationship between the parties is present if there is ‘some sort of transaction between the parties. [Citations.] Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.’ ” (Hoffman, supra, 228 Cal.App.4th at p. 1187, original italics, internal citations omitted.)

•“Even if a fiduciary relationship is not involved, a non-disclosure claim arises when the defendant makes representations but fails to disclose additional facts which materially qualify the facts disclosed, or which render the disclosure likely to mislead.” (Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 666 [51 Cal.Rptr.2d 907], internal citations omitted.)

•“ ‘[T]he rule has long been settled in this state that although one may be under no duty to speak as to a matter, “if he undertakes to do so, either voluntarily or in response to inquiries, he is bound not only to state truly what he tells but also not to suppress or conceal any facts within his knowledge which materially qualify those stated. If he speaks at all he must make a full and fair disclosure.” ’ ” (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 613 [7 Cal.Rptr.2d 859].)

•“While a reasonable jury could, and in this case did, find these warnings inadequate for product liability purposes given [defendant]’s knowledge of the risk of NFCI’s, these statements are not ‘misleading “half-truths” ’ that give rise to a duty to disclose in the absence of an otherwise sufficient relationship or transaction. To hold otherwise would unduly conflate two distinct areas of law, products liability and fraud, and transform every instance of inadequate product warning into a potential claim for fraud.” (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 313-314 [213 Cal.Rptr.3d 82].)

•“[F]raudulent intent is an issue for the trier of fact to decide.” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061 [141 Cal.Rptr.3d 142].)

•“[T]here are two causation elements in a fraud cause of action. First, the plaintiff’s actual and justifiable reliance on the defendant’s misrepresentation must have caused him to take a detrimental course of action. Second, the detrimental action taken by the plaintiff must have caused his alleged damage.” (Beckwith, supra, 205 Cal.App.4th at p. 1062.)

•“[P]laintiffs argue that actual reliance cannot logically be an element of a cause of action for deceit based on an omission because it is impossible to demonstrate reliance on something that one was not told. In support of the argument, plaintiffs cite Affiliated Ute Citizens v. United States, supra, 406 U.S. 128 (Ute) … , Interpreting Rule 10b-5, the high court held that ‘positive proof of reliance is not a prerequisite to recovery’ in a case ‘involving primarily a failure to disclose … .’ [¶] Contrary to plaintiffs’ assertion, it is not logically impossible to prove reliance on an omission. One need only prove that, had the omitted information been disclosed, one would have been aware of it and behaved differently.” (Mirkin, supra, 5 Cal.4th at p. 1093.)

•“The fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced. There is no duty resting upon a citizen to suspect the honesty of those with whom he [or she] transacts business. Laws are made to protect the trusting as well as the suspicious. [T]he rule of caveat emptor should not be relied upon to reward fraud and deception.” (Boschma, supra, 198 Cal.App.4th at p. 249, original italics.)